Following a year of dramatic shifts and continuous uncertainty, hoteliers are hopeful about finding new footing in 2021.
However, with so much noise about the potential state of the industry, it’s useful to hear from senior players who have been there and done it for decades – building companies, brands and creating shareholder value throughout market cycles.
HospitalityVIEW brings such leaders together regularly to advance industry thinking. Michael Frenkel, President of MFC PR and moderator for HospitalityVIEW, caught up with charter member and President of TCOR Hotel Partners, Tom Corcoran, after the group’s most recent meeting.
Michael Frenkel:
Hotel companies were actively promoting direct bookings throughout the last business cycle, but have those efforts held up during quarantine? Is Brand.com holdings its own against online travel agencies?
Tom Corcoran:
“Unfortunately, I’ve seen a resurgence of OTAs over the past year. Brand.com was built on the backs of business travelers, they are the heart of branded hotel bookings and hotels have made great strides in getting these customers to book direct over the past few years. Since COVID, however, we have seen OTAs increase their hold over the total demand at hotels, but this is largely because hotels are host to different customers right now.
“Hotels aren’t host to the same group and business travelers they are used to, and those who are traveling are finding it easier to shop around for rates. These travelers aren’t concerned about brand loyalty right now to the same degree as typical brand-loyal customers. Following COVID, Brand.com will regain its previous position in the market as frequent travelers return to their preferred method of booking. So, we have seen a major shift in distribution, but it’s far from permanent.”
MF:
Considering recent news of a vaccine, what do you think the runway for hotel recovery looks like over the next few months?
TC:
“I see things being darker the next few months versus where they were in November. At the beginning of December, we entered a new phase of the COVID pandemic, and cities and states are beginning to shut down once again. This will impact hotel performance in January and February.
“People who have been in this business for a long time have seen many difficult downturns, but this is the longest downturn we’ve seen thus far. Our down period in previous recessions lasted months and had a fast rebound. On a positive side we are still seeing weekends at high-end properties remain profitable in some leisure-focused markets, which means the desire to travel remains strong.”
MF:
What do you think is the greatest challenge facing hoteliers over the next few months?
TC:
“While we are seeing many properties continue to operate at 50% occupancy in some areas throughout the U.S., the industry remains vulnerable to future potential lockdowns. Still, operators have found industrious ways to generate positive EBITDA on lower occupancy and rates, and that has surprised me. Part of that is a result of cutting back on non-essential services, no longer performing daily housekeeping, and cutting back on F&B. I’m hopeful that additional COVID relief will eventually find its way to the hotel industry. If that is delivered and a vaccine is made available by the first or second quarter of 2021, hospitality should see some return to life in time for Q3 2021.”
MF:
Hotels have made some major strides investing in new technology this year. Is this tech’s moment in hotels?
TC:
“With 20 million hospitality workers left unemployed today, it’s hard to say technology will solve the biggest problems facing hotels right now. A lack of demand is the biggest issue hotels have to overcome, and we need people willing to work in hotels as well. Technology has certainly helped hospitality stay afloat in the short term, but in the long term we need to approach hotel labor in new ways.
“This is why we have seen a lot of cross training take place, which I think will aid hospitality as a whole. Right now, we have people who are gaining experience in every corner of the property. Many of our front-desk workers are spending a few hours a day working in housekeeping or in F&B, and it is giving them a better understanding of hospitality as a whole. There are other benefits to this strategy as well. If you have someone who has experience as director of sales at the front desk, they do what they do very well and ask all the right questions. Hospitality may very well eventually return to normal one day, but I think people in this business are growing into utility players rather than workers performing specific job tasks.”
MF:
What is the biggest trend you are watching for leading into 2021?
TC:
“I think we should all be paying very close attention to debt markets and how lenders react to changing economic conditions in the new year. It remains to be seen if they will work with borrowers and ride the downturn out like they did during the great recession, which would be ideal for all parties since at that time most of them recovered all the money they invested. Or, they could retract like they did in the late 1980s, which led to 25 percent of hotels falling into foreclosure or facing government acquisition. Those are the two extremes we are looking at, and I think both hold water.”
